What Does Falling FICO Scores Mean

?Because anything that affects your credit score will also affect your ability to purchase anything on credit again, people who experience the hardship of a foreclosure or a bankruptcy are often unclear as to how those events will ultimately impact their financial future. The good news is that the impacts of various different financial events on a person’s credit score can be measured using data from the Fair Isaac Corporation (FICO). The FICO group was one of the first U.S. credit scoring companies and they started scoring credit ratings way back in 1956. Today, the group provides solid information on how short sales, bankruptcies, and foreclosures will affect your credit score. FICO provides consumers with a breakdown of the impact of those events in the form of a handy chart relative to two hypothetical average credit scores, one at 680 and the other at 780. The FICO chart makes it easy to see the impacts of the various negative financial events at a glance, and major impacts like a bankruptcy will usually cause a credit score of 680 to fall by about 130 to 150 points, and a 780 credit score will see about a 220 to 240 point drop.
 
According to the FICO chart, people who start with an average credit score of 680 will see the following impacts related to specific negative financial events:
 
*30 days late on a mortgage payment will result in a score that falls to about 600 to 620 points.
*90 days late on mortgage will cause a score to fall to about 600 to 620 points.
*A short sale with no deficiencies results in a lower score of around 610 to 630 points.
*A short sale with a deficiency or foreclosure results in a score of around 575 to 595 points.
*A bankruptcy alone will usually result in a lower score of around 530 to 550 points.
 
The impacts are similar for a person with a higher credit score of 780 too:
 
* 30 days late on mortgage results in a lower score of around 670 to 690 points.
* 90 days late on mortgage results in a lower score of around 650 to 670 points.
* A short sale, no deficiency results in a lower score of around 655 to 675 points.
* A short sale with a deficiency or foreclosure results in a lower score of about 620 to 640 points.
* Bankruptcy alone will result in a lower score of around 540 to 560 points.
 
The loss of valuable points on your credit score is unfortunate, but it is not the end of your financial prosperity forever. It is temporary, and despite the fact that a bankruptcy will be reported on your credit report for ten years, many people actually see an improvement in their scores within a year or two from completion of a bankruptcy action. A bankruptcy, short sale, or foreclosure will definitely have an impact on your ability to obtain credit in the future, but it is possible to reduce the negative impacts depending on the type of financial event and the types of loans sought. In those cases where consumers absolutely must resort to bankruptcy because they have no way to pay off their large debts, it could actually be the fastest way to reestablish their credit.